A few years ago I was sitting in a meeting about a proposed corporate governance campaign when one of the younger people in the room began a sentence with the words "As shareholders, we...."
It really jarred with me at the time, and still does, so I thought I'd try and articulate why this is. Part of it was probably just an age thing. I guess it always feels a bit odd to hear someone quite young seek to present themselves as the voice of an institution, financial or otherwise.
But I think that merely served to make it more obvious how problematic it is to invoke the identity of "shareholders" in support of particular objectives. There are a couple of ways of looking at this. First, what is the location of the "shareholders"? Is it the share register, where usually the asset manager is the primary name, or do we need to look behind that to a beneficial owner (an asset owner)? Or is it even further back, say in the membership of a pension fund?
The politics here are interesting. It's obviously the beneficial owner or beneficiary that has the economic interest in the shares held. But both corporates and much of the finance sector are much happier viewing the asset manager - the intermediary - as the 'shareholder'. Of course partly this reflects the reality that asset owners delegate, but it's striking that some people seem to like it that way, and oppose reforms that might allow beneficial holders to behave more like shareholders.
Second, even within investment institutions there's a question over where the "shareholder" identity is located. Many people in the RI field understandably worry about ESG-focused staff being separated from the "investment process". But then that suggests, again, that the "real" identity of the "shareholder" is a mainstream asset manager. This looks like prototype theory in action, as applied to corporate ownership - mainstream asset managers are for many people the best example of "shareholder-ness". (And in return, many of us trying to change things are happier labelling the asset owner as the 'real shareholder'.)
But that isn't the end of it. A further identity problem arises if we consider the gap between the behaviour of the 'best example' of a "shareholder" and public policy expectations. In the policy world, "shareholders" should "act like owners" and therefore they need the tools to undertake this activity. Yet, as I've blogged many times before, in reality many mainstream asset managers have actually opposed the extension of shareholder powers. Similarly, both the current and previous administrations have prodded "shareholders" to undertake the kind of activity (value-focused engagement) that is supposed to be in their own interest.
This has the interesting effect of the state trying to create a new shareholder identity, as expressed in certain behaviour, because the actual behaviour of these 'best examples' of "shareholders" isn't close enough to how the state thinks financial market participants should behave. So there is an idealised notion of what "shareholder-ness" should be, to which actually existing shareholders are being encouraged to adhere.
On reflection, both the identity of "shareholders", and the property of "shareholder-ness" are a lot more up for grabs than you might imagine.